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CFA FOOD·4·THOUGHT Friday, August 10, 2007 195 Farmington Avenue, Suite 200 · Farmington, CT 06032 · 860 677 8097 · Fax 860 677 8418 The information presented here is not intended to take the place of legal or professional advice or to be relied on as such, nor do they necessarily express the views of the CFA. >> Dues-paying members: If you would like to receive this bulletin via email, please forward your email to email@example.com. Sign Up Now for Summer Fun Picnic! The 1st Annual CFA Summer Fun Picnic will be held on Thursday, August 30 at High Meadow in Granby, Connecticut. Reward your employees with an afternoon of fun, food, and friends; invite a favorite vendor. The event runs from 12-6 PM, with a round robin softball tournament to start at 12:30 – the winning team gets the trophy and bragging rights for a year so sign up a company team! There will also be a raffle drawing at 4 PM. Event information is included, or download registration from our website (www.ctfood.org). Call the CFA office for answers to any questions. 59th Annual Convention to Honor Robert LaBonne, Sr. We return to Newport, Rhode Island for our 59th Annual Convention on October 5-7, honoring 2007 CFA Person of the Year Robert LaBonne, Sr. (LaBonne’s Markets). Our business speaker will be Kevin Coupe, founder and Content Guy of MorningNewsBeat.com, and there will be activities and tours, not to mention tickets to Oktoberfest! Register today by downloading forms from our website, or contact the CFA. RECALLS Lakeside French Cut Canned Green Beans – Although New England is not on the distribution list for recalled green beans, we are providing the information here due to the potential severity of botulism: The U.S. Food and Drug Administration (FDA) is warning consumers not to eat certain brands of French Cut Green Beans in 14.5 oz. cans manufactured by Lakeside Foods Inc., of Manitowoc, Wisconsin because the product may not have been processed adequately to eliminate the potential for botulism toxin. This warning is not related to another recent warning for botulism. As of August 1, 2007, FDA had not received reports of illnesses related to the product. The affected Lakeside cut green beans are sold under the following labels: Albertson's, Happy Harvest, Best Choice, Food Club, Bogopa, Valu Time, Hill Country Fare, HEB, Laura Lynn, Kroger, No Name, North Pride, Shop N Save, Shoppers Valu, Schnucks, Cub Foods, Dierbergs, Flavorite, IGA, Best Choice and Thrifty Maid. The specific codes (top line of can code) involved are: EAA5247, EAA5257, EAA5267, EAA5277, EAB5247, EAB5257, ECA5207, ECA5217, ECA5227, ECA5297, ECB5207, ECB5217, ECB5227, ECB5307. Consumers who have any of these products or any foods made with these products should dispose of them immediately. If the code on an affected can is missing or unreadable, consumers should throw the product out. Lakeside Foods has informed FDA that it is voluntarily recalling all of the potentially contaminated products. Consumers with questions or concerns should call the company at 800-466-3834 ext. 4090. The product was distributed in AL, AZ CO, FL, GA, IL, IN, KS, KY, MI, MO, MS, NC, NY, OH, OK, TN, TX, VA, WI and Canada. Whole Foods Chocolate Bars – Supermarket News reports Whole Foods Market has issued a recall of its 365 Organic Everyday Value Swiss Dark Chocolate Bars because they may contain undeclared almonds. The dark chocolate bars were sold in Whole Foods stores in AL, CO, CT, FL, GA, IL, KS, KY, LA, MA, MD, MI, MN, MO, NB, NJ, NM, NY, NC, OH, PA, RI, SC, TX, VA, WI, and DC. DISASTER FOOD STAMP PROGRAM INFO Non-pandemic disaster situations often warrant a Disaster Food Stamp Program (DFSP) and/or a state seeking authority to replace food stamp allotments for clients affected by a natural or man-made disaster. Find guidance on DFSP at www.fns.usda.gov/disasters/response/DFSP_Handbook/guide.htm, updated by USDA Food and Nutrition Service in 2007. And for information on strategies advocates can pursue to get their state to maximize federal nutrition aid in disaster situations, see the Food Research Action Center’s "Advocate's Guide to the Disaster Food Stamp Program," posted at www.frac.org/pdf/dfspguide06.pdf. U.S. HOUSE PASSES BILL TO REVAMP FDA FOOD SAFETY Reuters reports the U.S. House passed a $90.7 billion funding bill last week that orders the FDA to write a plan for improving its food safety work, brought into doubt by tainted imports this year. Under the House bill, the FDA must set clear goals for a multi-year overhaul of its food safety operations and submit a plan to Congress early next year with implementation due by July 2009. Key components could include use of systems like the Hazard Analysis Critical Control Point, enforceable standards for food safety, and review of safeguards in food-exporting countries. Some $28 million will be available next July to put the plan to work. The bill also sets a timetable to begin country-of-origin labeling of beef, pork, mutton, and goat meat in grocery stores on October 1, 2008; expands to all states a program for fresh fruit and vegetable snacks in grade schools; bars the U.S. Department of Agriculture (USDA) from proceeding with a risk-based inspect- tion system for meat processing plants; and allows importation of prescription drugs from other nations. Funding would be cut off in the House bill for further work on a nationwide livestock-tracking system, embraced in 2003 as a way to prevent the spread of mad cow disease. The Government Accountability Office found many weaknesses in the tracking system, such as no USDA benchmarks to tell if participation (still voluntary) is high enough for the system to be effective. Some $117 million in federal money has been spent on animal ID but the program is years behind schedule. The Senate now considers the bill that Representative Rosa DeLauro (D-CT) called "the first step in a fundamental food-safety transformation at FDA." But the White House has threatened to veto it on grounds it spends too much and ties the administration's hand on issues ranging from prescription drugs to school snacks. In addition, The Food Institute reports Representative John Dingell (D-MI), chair of the Committee on Energy and Commerce, released draft legislation that aims to strengthen the U.S. system for ensuring the safety of imported food and drugs. The proposed legislation would create a user fee on imported food and drug shipments that would be used to hire additional personnel at both the U.S. border and FDA labs to increase inspections. It would also prevent the Secretary of Health and Human Services (HHS) from closing or consolidating any of the current 13 FDA field laboratories and grant the agency new authority to issue mandatory recalls, require country of origin labeling, limit the number of ports of entry for food items, halt imports of certain products until a foreign facility can demonstrate that significant steps have been taken to rectify an identified problem, and increase civil monetary penalties for manufacturers or importers that violate the Federal Food, Drug and Cosmetic Act. Supermarket News also reports during a visit to a grocery warehouse last week, HHS Secretary Michael Leavitt was told consumer packaged goods (CPG) manufacturers need to improve the quality of packaging used in the shipment of goods to ensure product safety and durability. “CPG companies have made refinements in case packaging quality to cut costs,” said Randy Fletcher, vice president of logistics and supply chain management for Associated Grocers. “As a result, when you commingle products, they don’t necessarily ride well or arrive at retail stores in good condition. That affects safety and durability in the supply chain.” Mr. Leavitt was on a fact-finding tour related to the safety of imported products. The Bridgeton News also reports Mr. Leavitt and FDA Commissioner Andrew von Eschenbach toured a produce facility in New Jersey that receives imported bananas, mangos, and pineapples, and the port of Elizabeth where contaminated toothpaste and other products have been confiscated in recent months. LEGISLATION REQUIRING CARGO INSPECTIONS SIGNED INTO LAW The Associated Press reports President Bush signed legislation late last week that expands inspections of air and sea cargo and shifts more anti-terrorism funding to high-risk states and cities. The bill requires screening of all cargo on passenger planes within 3 years and sets a 5-year goal of scanning all container ships for nuclear devices before they leave foreign ports. It also elevates the importance of risk factors in determining which states and cities get federal security funds, which would mean more money for cities such as New York and Washington. The bill includes a number of other provisions including: money for a new program to ensure security officials can communicate with each other; authorization of more than $4 billion for 4 years for rail, transit, and bus security; establishing a new electronic travel authorization system to improve security for visitors from countries participating in the visa waiver program; establishing a voluntary certification program to assess whether private entities comply with voluntary preparedness standards; strengthening a board that oversees privacy and civil liberties issues; and providing civil immunity to those who report in good faith suspicious activities that threaten the safety and security of passengers on a transportation system. While lauding Congress for passing the bill, President Bush said he will work with lawmakers to ensure the screening provisions are workable and do not impede commerce. 1 MILLION POUNDS OF CHINESE SEAFOOD NOT SCREENED In a story that should surprise no one by now, the Associated Press reports at least 1 million pounds of suspect Chinese seafood landed on American store shelves and in restaurants despite an FDA order that the shipments first be screened for banned drugs or chemicals. The frozen shrimp, catfish, and eel arrived at U.S. ports under an "import alert," which means the FDA is supposed to hold every shipment until it had passed a laboratory test. But that was not what happened, according to an AP investigation of shipments since last fall. 1 of every 4 shipments the AP reviewed got through without being stopped and tested. China is America's biggest foreign source of seafood, with the 1.06 billion pounds it supplied in 2006 accounting for 16% of all seafood Americans buy. While no illnesses have been reported, AP said the episode raises serious questions about the FDA's ability to police the safety of America's food imports. "The system is outdated and it doesn't work well. They pretend it does, but it doesn't," said Carl Nielsen, who oversaw import inspections at the agency until he left in 2005 to start a consulting firm. If the system cannot stop known risks, Mr. Nielsen said, how can it protect against hidden dangers, such as the ingredients from China that made toothpaste potentially poisonous and killed dozens of pets earlier this year? "The FDA itself admits that this seafood needs inspection, but then doesn't have the capability to inspect it," said Senator Charles Schumer (D-NY), a critic of the FDA's food safety record, in reaction to the AP's findings. "This is an example of government failure at its worst." FDA officials acknowledged that some shipments slip through import alerts, but said overall they work. "Any time you introduce a human element into something, I don't think you can necessarily guarantee 100%," said Michael Chappell, the official responsible for field inspections and labs. Normally, the FDA inspects just 1% of the cargo it oversees. When goods land under an import alert, however, they are considered guilty until proven innocent: all shipments are supposed to be held until private tests that cost importers thousands of dollars show the seafood is clean. Sometimes, the FDA double-checks those tests in its own labs. Products can be detained for months, irking importers. But a shipment can escape inspection if, for example, a company uses a name or address not on an import alert. That appears to be what happened in one case AP found. Also, FDA workers must review hundreds of shipments that flash across a computer screen each day and may miss some tagged for testing. The agency has about 450 budgeted positions for screening approximately 20 million shipments annually of such things as fish, fruit, and medical devices. Last summer, FDA labs began accumulating evidence that 15% of farm-raised shrimp, eel, and catfish contained dangerous or unapproved substances. The agency started throwing individual companies on its watch list, ultimately issuing a sweeping mandate that all shrimp, eel, and catfish raised on Chinese farms be stopped and tested. The Chinese government and U.S. importers say the FDA overreacted. It would be impossible, importers say, for a person to eat enough seafood to be affected by the trace levels that FDA found. Federal food safety officials said while the seafood poses no immediate danger, long-term exposure could increase the risk of cancer or undermine the effectiveness of drugs used to fight outbreaks of disease. "I don't really know why they conducted the special test on our products," said a spokesperson for one company that the FDA placed on its watch list in April after finding its dusted shrimp contained nitrofurans, an antibiotic that may cause cancer. "We've been exporting products to the U.S. for many years and we respect their standards and we meet their standards," she said. The expanded testing mandate has rattled China, and U.S. importers said they are being told the government is holding back shipments until tests show they will pass U.S. muster. The disruption has yet to result in any substantial price increases here. ALMOND GROWERS REQUEST PASTEURIZATION DEADLINE EXTENSION The Associated Press reports the largest organization of almond growers is asking the government for a 6-month delay before enforcing a new rule requiring all California almonds to be pasteurized, saying farmers cannot adjust in time to meet the original deadline. In January, the USDA announced a requirement that virtually all almonds be pasteurized by September 1, following Salmonella outbreaks in 2001 and 2004 that were traced to raw almonds. The CA Almond Board is asking the implementation date to be pushed back to March 1, 2008, to give pasteurization facilities time to comply and avoid interrupting the flow of nuts to the market. Board officials said without enough pasteurizing capacity, the industry cannot move forward. Almonds have become increasingly lucrative as they gain popularity with health-conscious consumers. Raw food diet followers and consumers preferring unprocessed, organic nuts protested the government's pasteurization decision and organized a national letter-writing campaign this spring asking the USDA to reconsider. "The board's request to delay is more evidence that this was a rushed decision," said Will Fantle, a Wisconsin-based farm policy research group that opposes almond pasteurization. GLUTEN-FREE HIGHLIGHTED AT FOOD EXPO FoodNavigator.com/Europe reports the recent IFT Food Expo in Chicago highlighted gluten-free products. Experts told attendees work still needed to be done on taste and texture even as the market for gluten-free products grows rapidly around the world, opening many opportunities. Jodi Engelson, a senior research scientist at Cargill said, "There is clearly a market opportunity for gluten-free foods. For the patients who suffer, the diagnosis rate is increasing. In response to this, we have witnessed over a 100% increase in gluten-free products over the last 7 years." Celiac disease is caused by an intolerance to gluten – the protein found in wheat, rye, and barley – and currently affects an average of 1 in 300 people in Europe. In Germany the figure is 1 in 200, while the U.K. reports a figure of 1 in 100. According to market analyst Mintel the overall “free-from” market has enjoyed 300%+ sales growth since 2000. The growing demand has opened up a new lucrative sector food makers are keen to exploit. The free-from market was worth €90 million ($123 million) in 2005, and Mintel said that the gluten and wheat-free sector has benefited from the nation's increasing interest in healthy eating. Sales of products such as wheat-free breads and cakes have grown by almost 120% over the last 3 years alone, reaching €48 million ($65 million). Ranjit Kadan, a researcher with the U.S. Department of Agriculture (USDA), said the gluten-free market is projected to be €1.25 billion ($1.7 billion) by 2010. However, researchers have yet to fully solve their greatest challenge, according to the experts at IFT: making products taste good. Gluten-free products will have to be defined by the Food and Drug Administration (FDA) by 2008; currently no standards exist, and products may claim food is gluten-free if it has no gluten, has a limited amount of gluten, or never had gluten. BIRDS EYE TO REPLACE COD IN FISH FINGERS In a sobering assessment of the state of the world’s fish stocks, Birds Eye announced it is replacing the cod used in its British fish fingers with pollock, according to the FinancialTimes.com. The move follows experts' warnings that cod stocks are perilously low; scientists warned last year that all commercial fisheries would be exhausted by 2048 if fishing rates continued at the same pace. Canadian cod stocks off the Grand Banks of Newfoundland collapsed in the early 1990s when they were fished out to serve the country's huge fish processing industry. The stocks have never recovered and experts fear a similar near-extinction awaits cod in other parts of the Atlantic. The problem is compounded as consumers tend to have fixed buying patterns of fish and are reluctant to try new fish. Pollock, a white fish found in seas around north Alaska, has a texture similar to cod but its stocks are more plentiful. Birds Eye produces 80% of the U.K.'s fish fingers and will make the switch in September. Martin Glenn, chief executive of Birds Eye, said the motivation behind the move was "enlightened self-interest" and that he was acting from economic rather than moral reasons. "In a competitive market, it's very hard to take a moral stance . . . But [cod] is less abundant than north Alaskan pollock and people are desperate to eat more fish," he said. Pollock is also cheaper than cod, which Birds Eye concedes will save money in the longer term. However, in the short term the move would be "cost-neutral", Mr. Glenn said, because the company will have to change its fishing, sourcing, and processing practices, change its packaging, and woo consumers' taste buds. REPORT FINDS CAFFEINE IN ENERGY DRINKS NO STRONGER THAN COFFEE Reuters reports a comparison published in the September issue of Consumer Reports found energy drinks generally contain no more caffeine than coffee. The comparison of 12 popular energy drinks found the caffeine in 8 ozs. of various brands ranged from 50-145 milligrams (mg), though most were in the 75- to 80- mg range (results were rounded to the nearest 5 mg). By comparison, the caffeine in an 8-oz. cup of brewed coffee can range from 65-120 mg, with an average of 85 mg, according to the National Coffee Association. Jamie Kopf Hirsh, associate editor at Consumer Reports and the report's author, said it was "good news" that energy drinks were not much more caffeinated than coffee, but said consumers should still be cautious. Even though 8 oz. is the standard serving size, most containers have more than that and most consumers drink more than that. "You don't have to be alarmed by this, you just have to account for it in your daily caffeine intake," Mr. Hirsh said. FOOD SOURCED FROM FARTHER AWAY MORE ENVIRONMENTALLY BENEFICIAL The Food Institute reports an op-ed piece in The New York Times opined that the term "food miles" should be viewed in a much wider manner than it currently is. The author notes while the push towards eating locally grown or produced food product is admirable, it is often more environmentally beneficial to source food from much further distances. Read the Op-Ed piece at the end of the newsletter. BIOFUELS WILL HELP FIGHT HUNGER, SAYS BRAZILIAN DIPLOMAT In an Op-Ed in the International Herald Tribune, Antonio José Ferreira Simões, director of the Department of Energy in Brazil's Ministry of Foreign Affairs contends the notion that biofuels will compete with food production and thereby hurt the global fight against hunger is a myth. He said on the contrary, biofuel production in developing countries holds the great potential of creating millions of jobs and ultimately boosting resources to buy food. Go to www.iht.com/articles/2007/08/06/opinion/edsimoes.php. NRF’S HOT 100 RETAILERS LIST Gourmet News reports the National Retail Federation's Stores magazine has released its second annual Hot 100 Retailers list, which highlights retail companies that reported the greatest-year-over-year revenue percentage growth including public companies with more than $100 million in sales. The convenience store category was the highest growing retail segment last year, with a 21.9% boost in sales, and department stores continued their upward climb with a 21.5% gain. Some grocery stores also made the list, and retailers that shed stores in the past year also improved profitability, according to the report. Sponsored by market research firm Alliance Data, the report is at www.stores.org/Current_Issue/2007/08/Cover.asp. POLL GIVES TOP MARKS TO SUPERMARKETS ON JOB THEY DO The Food Institute reports a new Harris poll that ranks industries on how well they serve consumers found the supermarket industry does the best job according to U.S. adults. 92% of adults think supermarkets generally do a good job and only 8% think they do a bad job, giving them a net positive score of 84 percentage points. Other industries receiving high net scores: online search engines (77 points positive); computer hardware companies (64 points positive); computer software companies (61 points positive); hospitals (58 points positive); banks (56 points positive); and packaged food companies (55 points positive). Online retailers scored midway with 48 points positive. There have been substantial changes since last year’s poll, with two-thirds of the industries trending downward. 6 industries showed improvements this year while 14 industries went down, many by double digits. Those showing the greatest changes include cable companies (down 29 points), tobacco companies (down 21 points), health insurance and managed care companies (down 17-18 points), and airlines (down 16 points). Car manufacturers actually increased 15 points from last year. Go to http://biz.yahoo.com/bw/070808/20070808005058.html?.v=1. CONVENIENCE STILL #1 CONSIDERATION FOR ON-THE-GO CONSUMABLES MARKET Packaged Facts reports time-pressed Americans continue to choose convenience over all other factors including healthfulness, price, and taste, when it comes to buying on-the-go food. According to “On-The-Go Eating in the U.S.: Consumer, Foodservice, Retailing & Marketing Trends,” 65% of consumers said they try to eat healthier but 33% said they do not have time to prepare or eat healthy meals. Growing commutes and work days and time demands on two-working-parent and single-parent households drove 41 million Americans to store-made, pre-cooked meals and 49 million to fast-food solutions last fall alone. Influenced by busy lifestyles, media reports about the health and weight-loss advantages of eating frequent small meals, and smaller portioned on-the-go options from the foodservice industry, one-third of Americans regularly skip meals, often grazing on snack foods as a substitute. "Restaurant food already comprises a sizable percentage of Americans' diets, and 1 out of every 10 people already buys food at a convenience store in a 2-week period," noted Tatjana Meerman, Packaged Facts' publisher. "Foodservice sectors are seeking to increase their shares of this growing market by adapting to changing consumer attitudes toward meal times, meal sizes, and health issues in order to make their products more convenient, healthier, and otherwise appealing." The report examines the increasing U.S. consumer trend toward foods designed to be eaten "on-the-go," explores the growing competition between restaurants and food retailers, pinpoints and analyzes shifting product trends, and identifies opportunities and strategies that foodservice providers, retailers, and packaged goods marketers can use to protect and grow their share of this market. The report is available at www.packagedfacts.com/Go-Eating-1421833, or at MarketResearch.com. COMPANIES TARGET MUSLIM CONSUMERS AS NEXT GROWTH NICHE The Economist reports while marketers and trendspotters in the Western world have segmented consumers into categories for targeted promotions, they still tend to tiptoe around Muslims as a distinct market segment. According to The Economist, although they have settled into a fairly comfortable relationship with Jews and Christians whose cultures they feel they know and understand, the cultural divide with the Muslim world seems to be too daunting. But a new study by advertising agency JWT points out that the approximately 6 million Muslims in America are, on average, richer and better educated than the general population: two-thirds of Muslim households make more than $50,000 a year and a quarter earn over $100,000, well over the national average of $42,000. Two-thirds of American Muslims have a college degree, compared with less than half of the general population. Muslim families also tend to have more children. These figures seem to indicate the perception that marketing specifically to Muslims is not worthwhile are wrong. According to JWT, food, finance, and packaged goods are the consumer markets most affected by Islamic law. The global halal market is worth some $580 billion annually; in America an estimated 16% of sales in the $100 billion kosher industry comes from Muslims who lack adequate halal options. Manischewitz, the leading maker of kosher foods, has already spotted an opportunity, launching its first campaign last year to reach out beyond Jewish customers. Muslim-owned consumer-goods companies are also beginning to tap the Muslim market in the West through such products as the Burgini, a full- coverage swimsuit by a company founded by a Lebanese immigrant in Australia, and Fulla the doll, created by a Syrian firm, which has dark hair, brown eyes and a small chest, and wears a white headscarf and a coat. Unlike America’s Barbie, Fulla does not have a boyfriend or a job, said the manufacturer; she spends her time cooking, reading, and praying. Western companies have also started to reach out to Muslim consumers, albeit slowly. In April, McDonald's began serving halal Chicken McNuggets and other food items permissible under Islamic law for a trial period at a restaurant in west London. The firm is treading carefully: the new offerings are not advertised beyond the walls of the restaurant. Yet demand is strong, sales are increasing, and McDonald's is thinking about extending the experiment. RESEARCH SHOWS ADVERTISING CAN TRICK TASTE BUDS OF YOUNG CHILDREN The Associated Press reports research appearing in the August Archives of Pediatrics & Adolescent Medicine and funded by Stanford University and the Robert Wood Johnson Foundation demonstrates advertising can “trick” the taste buds of young children. The study involving 63 children aged 3-5 from Head Start centers in San Mateo County, CA found the preschoolers believed anything made by McDonald's tasted better. Even carrots, milk, and apple juice tasted better to the kids when they were wrapped in the Golden Arches packaging. Youngsters sampled identical McDonald's foods in name-brand and unmarked wrappers; the unmarked foods always lost the taste test. "You see a McDonald's label and kids start salivating," said Diane Levin, a childhood development specialist who campaigns against advertising to kids (she had no role in the research). Ms. Levin said it was "the first study I know of that has shown so simply and clearly what's going on with" marketing to young children. Study author and Stanford University researcher Dr. Tom Robinson said the kids' perception of taste was "physically altered by the branding." He said it was remarkable how children so young were already so influenced by advertising. The study is likely to stir more debate over the movement to restrict ads to kids, coming less than a month after 11 major food and drink companies, including McDonald's, announced new curbs on marketing to children under 12. AUTOMATING LABOR SCHEDULING SAVES CANADIAN CHAIN PAYROLL DEPT. OT Supermarket News reports a 20-store chain in Victoria, British Columbia said it has been able to reduce overtime hours incurred by its payroll department after completing its rollout of an automated labor scheduling system from a company based in Chelmsford, Massachusetts. Previously, store managers hand-wrote schedule information that the payroll department then manually keyed in. “The payroll department did a lot of overtime to process 3,500 employees,” said the chain’s front-end operations director. “But this summer we were short two [payroll] employees due to illness, and we still managed to get by with minimal overtime.” EMPLOYERS BRACE FOR DHS CRACKDOWNS The Associated Press reports a Bush administration crackdown on illegal immigrants has employers bracing for problems. The Department of Homeland Security (DHS) is expected to make public new rules for employers notified when a worker's name or Social Security number is flagged by the Social Security Administration (SSA) as a “no match.” As drafted, the rule will require employers to fire people who can not be verified as legal workers and who can not resolve within 60 days why the name or Social Security number on their W-2 does not match the government's database. In the past, employer responsibility for a SSA “no match” letter generally ended with notifying the worker of the discrepancy, leaving the employee to deal with it. Attorneys have long warned employers to be careful about firing a worker because of a “no match” letter because it could be the result of a typo in a name or number, a name change that was not reported after marriage, a computer error, or other reasons. But under the new rule, an employer who does not fire a worker could be deemed to have knowingly hired an illegal worker, incurring fines of $250-$10,000 per illegal worker and incident. "There's a lot of fear and anxiety about what this rule is going to mean, particularly in the agricultural sector," said Craig Regelbrugge, spokesperson for the American Nursery and Landscape Association and co-chairman of the Agriculture Coalition for Immigration Reform. DHS said the new rule gives employers who comply immunity from penalties if illegal workers are found at their business in an investigation or raid. A DHS spokesperson warned that the U.S. Immigration and Customs Enforce- ment (a division of DHS) "is going to be tough and aggressive in the enforcement of the law. You are going to see more work site cases. And no more excuses." But Laura Reiff, co-chair of the Essential Workers Immigration Coalition, a national group of business and trade associations, said, "Congress didn't act. They didn't do what they needed to do on comprehensive immigration reform. Now there's going to be some pain to pay, and Congress is not going to feel the pain right away, it's the communities (of employees), and that's a real shame." For one owner of a nursery in Texas, the stricter rule could mean losing some of his workers. He suspects a few of his workers could have trouble with their Social Security numbers and said he will fire them if the problems are not resolved. "Of course, it would add to the workload for the other workers. It would reduce our production and our output. Not all of our demand would be met on our products. Operating costs would go up," he said. “We're all very cautious and we're all very nervous.” GROWING EMPLOYEE DEMANDS FOR PERSONNEL FILE ACCESS WORRIES EMPLOYERS The National Law Journal reports a growing number of employees are requesting access to their personnel files, which has employers smelling legal trouble and attorneys sounding warnings. Labor and employment attorneys say it has become increasingly crucial for employers to maintain detailed, accurate personnel files, given the rising demand for them. Several reasons have been cited for the rise in such requests: layoffs and terminations have employees more closely scrutinizing their personnel files and challenging such actions; people are switching jobs more often now and want to know if anything in their file will help or hurt them in another job; and several legislative efforts have been made to give employees wider access to their personnel files. Employers that are not particularly savvy about the law and who do not know what to keep and what not to keep in a personnel file are a “growing problem," said Robert Boisvert Jr., a Minneapolis attorney. Employers often have trouble defending workplace decisions because of poor or nonexistent personnel files. "Small employers fall prey to this the most because they don't have an H.R. staff, and it's not easy to know all the laws if you're a small employer," he said. He noted plaintiffs’ lawyers have long requested personnel files during discovery; what is different now is that employees are asking for them directly. There is no federal law requiring employers to give employees access to their personnel files; state laws govern access and vary widely, with some allowing rebuttals and copying privileges while others permit only the right to see the file (see following for CT laws). Meanwhile, labor and employment attorneys say personnel files can be legal land mines for employers: defamatory or personal information such as age, race, sex, or medical information could lead to discrimination suits. Poor documentation (or none at all) could persuade a jury that there is no proof of bad performance in a wrongful termination suit. "Sometimes the fact that something is not documented is more of a red flag to people than what is documented," said one employment attorney. "For example, if you get fired for poor sales, and the employer says, 'Well, we've counseled the employee several times and she didn't listen,' and there's nothing in the personnel file, then the jurors are increasingly unlikely to believe the employer." She said too often, managers complain they do not have time to keep detailed personnel records. "My response is basically, 'It's your protection.'" Denying employees access to their personnel files can also backfire on an employer, even in states where it is not mandatory, cautioned another lawyer, noting that in the event of a lawsuit, an employer might not be able to use the file to defend himself if he has denied that file to the employee. In CT, employers must allow an employee to inspect his/her personnel file and any medical records pertaining to the employee the employer may have, after written request from the employee. Any medical records must be kept separately from the personnel files. If an employee disagrees with any of the information contained in such file or records, removal or correction may be agreed upon by employee and employer, but if no such agreement is reached, an employee may submit a written statement explaining his/her position. This statement must be maintained as part of the employee’s personnel files or medical records and included in any transmittal or disclosure of such file or records. Written authorization by the employee is required before any individually identifiable information contained in his/her personnel file or medical records can be disclosed by an employer to any person or entity not employed by or affiliated with the employer. There are some narrow exceptions to this rule, such as where the information is limited to the verification of dates of employment and the employee's title/position and wage/salary (other exceptions are listed in CT General Statutes § 31-128f). Employees may not remove personnel files or medical records although copies may be requested in writing, and employers are not obligated to allow inspection of an employee’s personnel file or medical records more than 2 times in a calendar year. Personnel files must be kept for at least 1 year after termination of an employee. COURT RULES “CASHED OUT” EX-WORKER CAN SUE FOR 401K MISMANAGEMENT The Legal Intelligencer reports the 3rd U.S. Circuit Court of Appeals has ruled that a former employee who had "cashed out" his 401(k) plan still has standing to sue the administrator of the plan under the Employee Retirement Income Security Act (ERISA) for alleged mismanagement of the fund. The appeals court reversed a lower court’s decision to dismiss the suit on the grounds that such a former employee, once cashed out, is no longer a "participant" in the plan and has therefore lost standing under ERISA. "When determining participant standing under ERISA, the relevant inquiry is whether the plaintiff alleges that his benefit payment was deficient on the day it was paid under the terms of the plan and the statute. If so, he states a claim for benefits, which, if colorable, makes him a participant with standing to sue," Judge Thomas Ambro wrote. Conexant's lawyers argued the claim was better characterized as one for damages rather than benefits because the loss alleged was too speculative or difficult to ascertain to be characterized as benefits. But Judge Ambro disagreed, saying, “Such a holding would allow an employer who had mismanaged individual account plan assets to avoid liability by cashing out the participants. By paying them the then-stated balance of their accounts when cashed out, the employer would, under Conexant's logic, pay out all of the participants' 'benefits,' thereby ensuring that none would have standing to sue for its breach of duty. We find it hard to believe that Congress intended such a result. Indeed, we have held that ERISA's legislative history indicates that its standing requirements should be construed broadly to allow employees to enforce their rights.” The case attracted significant attention on appeal, with friends-of-the- court briefs supporting the plaintiff filed by the U.S. Department of Labor and the AARP, and from the National Association of Manufacturers supporting Conexant. The ruling revives a proposed class action ERISA suit that accuses the administrators of the Conexant 401(k) plan of breaching their fiduciary duty by allowing some employees to choose a plan that had only Conexant common stock. The suit alleges that the company's stock price plummeted in 2004 as the result of a risky and ultimately failed merger attempt, and that the administrators made false and misleading statements about the merger that caused the plaintiffs to invest in the fund. "Rather than suing the plan itself… which would likely be fruitless, as the very premise of the suit is that the plan itself improperly lost money, [the plaintiff] sued the person liable to make good on the loss," Judge Ambro wrote. "If successful, this suit will restore assets to the plan that are allocable to [the plaintiff]'s account, and he will then get a distribution from that restored account. Far from creating problems, this is exactly the process that [the law] contemplates." WEATHERING A CREDIT CRUNCH FOR SMALL BUSINESSES David Enrich of The Wall Street Journal writes that a credit crunch could be on the way for small businesses as more borrowers default on loans and banks tighten their purse strings. Industry experts say lending jitters may soon extend to small firms as well, making it harder for them to find loans. Most bank executives said for now, they have not toughened lending standards or raised interest rates on loans to small businesses. "The small-business market, despite all we hear and see, is still really vibrant," said Bob Ash, Wachovia Corp.'s national sales manager for small business. "I don't think anybody's letting off the pedal at this point." But banks say some businesses that received loans in recent years are falling behind on payments and default rates are expected to accelerate, so small companies may want to think about ways to insulate themselves from the possibility of a credit crunch. Basic steps, including picking a bank that caters to their situation, keeping detailed financial records and being prepared to put up personal assets like homes as collateral, can make a big difference for young companies seeking funding. If business owners think they may need a credit line or loan in the near future, "I would get on this now...because it could be much harder in two or three months," said Seamus McMahon, a vice president for consulting firm Booz Allen Hamilton Inc. One of the most important decisions small businesses face as they hunt for loans is which bank to turn to. Business owners should keep in mind how different types of banks evaluate loan applications. Big institutions that promise speedy approvals or rejections of applications, generally rely on sophisticated credit-scoring models based, in large part, on the business owner's personal credit history. By contrast, community banks, credit unions and other smaller lenders often lean more heavily on their knowledge of the local economy and the would-be borrower's business model and track record of running or launching businesses. Small businesses should "figure out if [they] fit better with the point-scoring model or if playing golf with the loan officer would help," said Bill Dunkelberg, chief economist at the National Federation of Independent Businesses and chairman of a small bank in New Jersey. Under this theory, an entrepreneur with a sterling credit history but plans for a risky venture may be better-served by seeking a loan from a major bank. Someone with scuffed credit but a successful business background probably should visit a local lender. Small businesses can also turn to credit unions, which are nonprofit institutions owned by their depositors. Credit unions tend to make smaller loans than banks and have been making a big push to attract more small-business customers, said Mike Schenk, senior economist at the Credit Union National Association, noting, "We are willing to make loans that for-profit institutions generally aren't willing to make." In addition, entrepreneurs should look for lenders with programs aimed at specific types of small businesses. Some small banks cater to certain industries and several large banks, including PNC Financial Services Group Inc. and KeyCorp, are targeting women who run small businesses. Pittsburgh-based PNC has vowed to lend $4 billion over 5 years to women-owned businesses, which are starting up at roughly twice the pace of small businesses owned by men, according to Karen Larrimer, PNC's executive vice president for business banking. When applying for loans, it also helps to have an existing relationship with the bank. "If you've been working with a banker who knows your business, you come out better in the long run," said Gay Abbott, executive vice president for commercial banking at SunTrust Banks Inc. in Atlanta. The banker "becomes a partner with the business, much like an accountant or an attorney," she said. While some banks have been hawking loans that don't require business owners to provide much financial documentation beyond recent tax returns, that's starting to change, says Marilyn Landis, the next chairwoman of the National Small Business Association, a Washington-based advocacy group. When applying for loans, small businesses should be ready to produce cash-flow statements and balance sheets. Even if the lender does not demand that kind of documentation, having it on-hand is likely to impress bankers and could tip the scales in favor of getting a loan approved. While young businesses often are not accustomed to maintaining such detailed records, many banks now offer – generally for a monthly or annual fee – cash-flow management and other record-keeping services designed to help small businesses keep tabs on their finances. Entrepreneurs in search of funding also need to be prepared to put their personal assets like a home on the line. But experts say that with home values stalling or falling in many parts of the country, business owners should not count on that as the only collateral as banks get more skittish. Steven Rogers, director of the Levy Entrepreneur Institute at Northwestern University's Kellogg School of Management in Illinois, said while small-business owners often are uncomfortable with putting their homes up as collateral, banks often demand it because it is a "testament to your conviction that this is something you really believe in." HELLO KITTY AS DISCIPLINE TOOL Agence-France Presse reports the cartoon character Hello Kitty will be used as a disciplinary tool to deter Thai police from engaging in "inappropriate" behavior. The Japanese emblem of cuteness will be used on bright pink armbands as punishment for officers who speak too aggressively to civilians, fail to turn off their engines when they park their cars, or commit other minor violations of proper conduct. Previously such offenses were punished by a written reprimand, but the police chief said that seemed to do little to deter future breaches of conduct. He said he hoped the Hello Kitty armbands would shame officers into shaping up. "I chose this symbol because it is pink and easy to see," he said. In addition to wearing the cartoon cat on their sleeves for one day, officers will also have to be accompanied by whoever is the deputy chief on duty for the day. _______________________________________________________________________________________ CFA UPCOMING: CFA Finance Committee Meeting · Thurs. Aug. 23, 2007, 9:00 AM · CFA office, Farmington, CT CFA Board of Directors Meeting · Wed. Aug. 29, 2007, 8:30 AM · CAS-CIAC Building, Cheshire, CT CFA Summer Picnic · Thurs. Aug. 30, 2007, 12-6 PM · High Meadow, Granby, CT CFA Executive Committee Meeting · Wed. Sept. 19, 2007, 8:30 AM · CFA office, Farmington, CT CFA 59th Annual Convention · Oct. 5-7, 2007 · Newport Marriott, Newport, RI ______________________________________________________________________________________ FOOD THAT TRAVELS WELL By James E. McWilliams • August 6, 2007 The New York Times Op-Ed The term “food miles” – how far food has traveled before you buy it – has entered the enlightened lexicon. Environmental groups, especially in Europe, are pushing for labels that show how far food has traveled to get to the market…. There are many good reasons for eating local – freshness, purity, taste, community cohesion and preserving open space – but none of these benefits compares to the much-touted claim that eating local reduces fossil fuel consumption…. On its face, the connection between lowering food miles and decreasing greenhouse gas emissions is a no- brainer. In Iowa, the typical carrot has traveled 1,600 miles from California, a potato 1,200 miles from Idaho and a chuck roast 600 miles from Colorado. 75% of the apples sold in New York City come from the West Coast or overseas, the writer Bill McKibben says, even though the state produces far more apples than city residents consume. These examples just scratch the surface of the problem. In light of this market redundancy, the only reasonable reaction, it seems, is to count food miles the way a dieter counts calories. But is reducing food miles necessarily good for the environment? Researchers at Lincoln University in New Zealand, no doubt responding to Europe’s push for “food miles labeling,” recently published a study challenging the premise that more food miles automatically mean greater fossil fuel consumption. Other scientific studies have undertaken similar investigations. According to this peer-reviewed research, compelling evidence suggests that there is more – or less – to food miles than meets the eye. It all depends on how you wield the carbon calculator. Instead of measuring a product’s carbon footprint through food miles alone, the Lincoln University scientists expanded their equations to include other energy- consuming aspects of production – what economists call “factor inputs and externalities” – like water use, harvesting techniques, fertilizer outlays, renewable energy applications, means of transportation (and the kind of fuel used), the amount of carbon dioxide absorbed during photosynthesis, disposal of packaging, storage procedures and dozens of other cultivation inputs. Incorporating these measurements into their assessments, scientists reached surprising conclusions. [T]hey found that lamb raised on New Zealand’s clover-choked pastures and shipped 11,000 miles by boat to Britain produced 1,520 pounds of carbon dioxide emissions per ton while British lamb produced 6,280 pounds of carbon dioxide per ton, in part because poorer British pastures force farmers to use feed. In other words, it is 4 times more energy-efficient for Londoners to buy lamb imported from the other side of the world than to buy it from a producer in their backyard. Similar figures were found for dairy products and fruit. These life-cycle measurements are causing environmentalists worldwide to rethink the logic of food miles. New Zealand’s most prominent environmental research organization, Landcare Research-Manaaki Whenua, explains that localism “is not always the most environmentally sound solution if more emissions are generated at other stages of the product life cycle than during transport.” The British government’s 2006 Food Industry Sustainability Strategy similarly seeks to consider the environmental costs “across the life cycle of the produce,” not just in transportation. “Eat local” advocates – a passionate cohort of which I am one – are bound to interpret these findings as a threat. We shouldn’t. Not only do life cycle analyses offer genuine opportunities for environmentally efficient food production, but they also address several problems inherent in the eat-local philosophy. Consider the most conspicuous ones: it is impossible for most of the world to feed itself a diverse and healthy diet through exclusively local food production – food will always have to travel; asking people to move to more fertile regions is sensible but alienating and unrealistic; consumers living in developed nations will, for better or worse, always demand choices beyond what the season has to offer. Given these problems, wouldn’t it make more sense to stop obsessing over food miles and work to strengthen comparative geographical advantages? And what if we did this while streamlining transportation services according to fuel-efficient standards? Shouldn’t we create development incentives for regional nodes of food production that can provide sustainable produce for the less sustainable parts of the nation and the world as a whole? Might it be more logical to conceptualize a hub-and-spoke system of food production and distribution, with the hubs in a food system’s naturally fertile hot spots and the spokes, which travel through the arid zones, connecting them while using hybrid engines and alternative sources of energy? As concerned consumers and environmentalists, we must be prepared to seriously entertain these questions. We must also be prepared to accept that buying local is not necessarily beneficial for the environment. As much as this claim violates one of our most sacred assumptions, life cycle assessments offer far more valuable measurements to gauge the environmental impact of eating. While there will always be good reasons to encourage the growth of sustainable local food systems, we must also allow them to develop in tandem with what could be their equally sustainable global counterparts. We must accept the fact, in short, that distance is not the enemy of awareness. James E. McWilliams is the author of “A Revolution in Eating: How the Quest for Food Shaped America” and a contributing writer for The Texas Observer.
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